Nothing contrasts Advanced Micro Devices (NASDAQ: AMD) more than Intel (NASDAQ: INTC) reporting strong growth ahead. When AMD held all the technical advantages in the same period, the company’s revenue growth forecast and weakness in the GPU space took investors off-guard. Due to the stock’s valuation ahead of results, AMD could not afford to miss. Now that the stock sliced around half its value from the $34.14 top, what should traders do?
Those who bought AMD stock at the $2 - $10 range need not pay any attention to the stock’s drop. Long-run, Ryzen, EPYC, and an eventual clearing of the GPU inventory will give profit margins a lift.
Anyone holding AMD at the top, in the range of $25 - $34 may take a loss now for 2018 and re-group. The stock’s recovery will take a few months, at the very minimum. AMD does not have enough sales channel momentum to offset weakness in the semicustom (chips to consoles) and GPU. IP revenue is uneven quarter-over-quarter, so that, too cannot be counted on to justify AMD’s valuations.
Wait Longer
Where AMD bottoms is a wait and see for two reasons. First, the selling pressure may continue as long-time bulls cash out. Second, market weakness will set off more selling in AMD stock. Conversely, if markets stabilize and volatility falls, AMD stock could attract speculators willing to pay 25 – 30 times forward earnings.
